Audit Report 2018-A-0008 Purchasing Cards Survey

Transcription

1 PALM BEACH COUNTY John A. Carey Inspector General Inspector General Accredited Enhancing Public Trust in Government Audit Report Purchasing Cards Survey May 14, 2018 Insight Oversight Foresight

2 PALM BEACH COUNTY John A. Carey Inspector General AUDIT REPORT 2018 A 0008 DATE ISSUED: MAY 14, 2018 Inspector General Accredited Enhancing Public Trust in Government PURCHASING CARDS SURVEY SUMMARY WHAT WE DID We conducted a purchasing card 1 survey of municipalities under the jurisdiction of the Office of Inspector General (OIG). This survey was performed as part of the OIG, Palm Beach County Fiscal Year (FY) 2018 Annual Audit Plan. Our survey obtained information about municipalities and their use of purchasing cards during FY 2017 (October 1, 2016 September 30, 2017). The OIG will use the information obtained in this survey in considering future audits. During our FY 2018 Annual Risk Assessment, we determined that purchasing card programs have a high risk of loss, theft, waste, and abuse because records relating to the expenditures are typically reviewed after the expenditure is completed. As such, we selected purchasing card programs as a global audit topic. WHAT WE FOUND Thirty eight (38) of the thirty nine (39) municipalities responded to our survey. The City of Boca Raton did not respond to our survey after three requests for response. We found 95% (36 of 38) of the municipalities surveyed had purchasing card programs. The report results are limited to the 36 municipalities responding to the survey that have purchasing card programs. The 36 municipalities issued a total of 1,448 purchasing cards to employees with total combined FY 2017 purchasing card expenditures of $28,459,158. We made the following observations from the 36 municipalities surveyed with purchasing card programs: Total purchasing card program expenditures for FY 2017 for each municipality ranged from $1,500 to $9,187, % (6 of 36) reported they had no written policies and procedures for their purchasing card programs. 72% (26 of 36) self-reported that they had either an external or internal audit / review conducted for their purchasing card program. Management and oversight for the purchasing card programs varied widely across entities. 1 We requested information about purchasing cards, credit cards, and fuel cards. For purposes of this report, the purchasing cards and credit cards are considered one combined purchasing card program. Fuel card information was excluded from the results Page 1 of 12

3 WHAT WE SUGGEST We suggest that municipalities review this report in order to learn how other municipalities are using purchasing card programs, and as a benchmark to compare their own utilization of purchasing card programs and expenditures to other municipalities in Palm Beach County. We suggest municipalities that have not had external or internal audits / reviews of their purchasing card programs ensure they adequately monitor and oversee the program and expenditures, including implementation of policies and procedures. Page 2 of 12

4 BACKGROUND The OIG 2018 Annual Audit Plan has multiple entities selected for purchasing card audits. The overall objectives for the global topic of purchasing cards audits included: Are internal controls in place and adequate to appropriately govern purchasing card use, including controls to prevent and detect fraud, waste, and misuse; and Are purchasing card expenditures in compliance with policies and do those expenditures serve a valid public purpose. We determined that purchasing card programs have a high risk based on the following: 1. High risk of loss, theft, waste, and abuse; 2. Records relating to expenditures are typically reviewed after the expenditure is completed; 3. Lack of support or inadequate support for purchasing card expenditures; 4. Lack of formal written policies and procedures to govern purchasing card programs; and 5. Lack of valid public purpose or improper personal use of purchasing cards. Based on the high level of risk associated with purchasing card programs, we selected purchasing card programs for inclusion in the FY 2018 Annual Audit Plan under the purchasing card global topic. Page 3 of 12

5 SCOPE AND METHODOLOGY Our office developed a purchasing card survey for municipalities under the OIG jurisdiction. We used the survey to determine which municipalities had the highest level of risk associated with their purchasing card programs and expenditures. Thirty eight (38) of thirty nine (39) municipalities provided a response to the survey; a 97% response rate. The survey (see Exhibit 1) requested the following information from respondents: Name of the municipality; Name, date, and telephone number of the person completing the survey; Number of employees of the municipality; Existence of a purchasing card program, including credit cards and fuel cards; Number of purchasing cards issued, including types of cards (Purchasing / Procurement, Credit, and Fuel) and the total value of transactions for each type of card for FY 2017; Existence of written, formal policies or procedures used for the purchasing card program; List of individuals who oversee or act as the program administrator for the purchasing cards, credit cards, and fuel cards; and Dates of any audits performed for Purchasing, Credit, and Fuel cards (including external or internal audits) and state by whom. We analyzed the responses and self-reported information obtained as a result of the survey. Based on our analysis of the information provided by the surveyed municipalities, we selected the Town of Jupiter and the City of Riviera Beach for audit under the FY 2018 Annual Audit Plan. We based the selection of the Town of Jupiter on the high total amount of purchasing card expenditures of $6,000,000 for FY 2017, the highest average expenditure per purchasing card of all municipalities surveyed of $127,660 for FY 2017, the Finance Director having been assigned to oversee the purchasing card program 2, and that the municipality has not been previously audited by the OIG Audit Division. We based the selection of the City of Riviera Beach on the vacancy of key management positions, the media reports of inappropriate spending, the high total amount of purchasing card expenditures of $796,197 for FY 2017, and the percentage (18%) of employees assigned purchasing cards. 2 The Finance Department overseeing the purchasing card program creates a potential segregation of duties conflict as the head of the Finance department may be responsible for purchasing authority operations (i.e. oversight of procurement related-policies that may include the Purchasing Card policy), as well as, accounting operations (i.e. payment processing for procured goods and services). A conflict in segregation of duties indicates a potential internal control deficiency in the prevention of fraud, waste, and abuse. Page 4 of 12

6 RESULTS Thirty eight (38) of thirty nine (39) municipalities responded to our survey. The City of Boca Raton did not respond to our survey after three requests for response. We found 95% (36 of 38) of the municipalities surveyed had purchasing card programs. The report results are limited to the 36 municipalities that responded to the survey that have purchasing card programs. We found total purchasing card program expenditures for each municipality in FY 2017 ranged from $1,500 to $9,187,373. The Town of Mangonia Park had the lowest FY 2017 purchasing card spend of $1,500. The Village of Wellington had the highest FY 2017 spend of $9,187,373. The OIG Audit Division conducted an audit of the Village of Wellington s Purchasing Card Program for FY 2011 (Audit Report 2012-A-0002). We further reviewed the FY 2017 purchasing card expenditures by analyzing the average purchasing card expenditures per purchasing card issued (total FY 2017 purchasing card program expenditures divided by the total number of purchasing cards issued). The Town of Jupiter had the highest average expenditures per purchasing card of $127,660 for FY Page 5 of 12

7 We found 17% (6 of 36) of the municipalities reported they had no written policies and procedures for the purchasing card programs. Municipality Town of Ocean Ridge Town of Loxahatchee Groves Town of Haverhill Town of Glen Ridge 3 Village of Royal Palm Beach Town of Juno Beach Written Policies or Procedures No No No No No No We found 83% (30 of 36) of the municipalities reported that there are written policies and procedures for the purchasing card program. Two of the 30 municipalities relied upon their purchasing policies to develop and provide written guidance to staff regarding the appropriate use of purchasing cards. We found 72% (26 of 36) of the municipalities self-reported they had either an external or internal audit / review of their purchasing card program within the last 11 years. We also found that management and oversight for purchasing card programs varied widely across municipalities. Municipalities varied on which department provided oversight and management of the purchasing card programs, from the Finance Department, Purchasing Department, Utility Administration, Municipality s Manager, Municipality s Administration Office, to the Municipality s Elected Officials. 3 A scope expansion was issued for the Town of Glen Ridge to include its purchasing card program with the FY 2018 Revenue Audit by the OIG Audit Division. Page 6 of 12

8 SUGGESTIONS We suggest that municipalities review this report in order to learn and identify how other municipalities are using purchasing card programs and as a benchmark to compare their own utilization of purchasing card programs and expenditures to other municipalities in Palm Beach County. We suggest municipalities that have not had external or internal audits / reviews of their purchasing card programs ensure they adequately monitor and oversee programs and expenditures including implementation of policies and procedures. Review or consideration of this report may be helpful for municipalities with purchasing card programs for comparison purposes. ACKNOWLEDGEMENT The Inspector General s audit staff would like to extend our appreciation to the thirty-eight (38) municipalities who responded to our purchasing card program survey and provided information, as needed, for our analysis. This report is available on the OIG website at: Please address inquiries regarding this report to Director of Audit, by at inspector@pbcgov.org or by telephone at (561) Page 7 of 12

9 EXHIBIT LIST Exhibit 1 Survey Template Exhibit 2 Purchasing Card Results Exhibit 3 Largest Purchasing Card Programs Expenditures Exhibit 4 Oversight Page 8 of 12

10 EXHIBIT 1 SURVEY TEMPLATE Page 9 of 12

11 EXHIBIT 2 PURCHASING CARD SURVEY RESULTS FY 2017 S Page 10 of 12

12 EXHIBIT 3 LARGEST PURCHASING CARD PROGRAM EXPENDITURES Page 11 of 12

13 EXHIBIT 4 OVERSIGHT Page 12 of 12